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World Markets – NZ Field Days

by Hugh Stringleman

Nations keen to secure their future food supplies flocked to the New Zealand National Agricultural Fieldays this year, led by China, whose imports from NZ are rocketing upwards.

Chinese vice-premier Xi Jinping headed a large delegation while Fieldays was on, which included many companies that already have strong business relationships with NZ companies, including investments in the primary sector.

Among other countries represented this year at Fieldays were delegations from France, Ireland, Australia, China, Chile, America, Italy, Belgium, and Argentina.

Mexico's Minister of Agriculture, Francisco Xavier Mayorga, also led a 20-strong delegation keen to see more of New Zealand's renowned pastoral farming practice.

With 50 million hectares of pasture land, water shortages and the effects of climate change already being felt particularly in the North of the country, Mayorga said Mexico needed to promote sustainable grazing.

Not all of these countries look to invest in NZ land or processing, but instead are keen to access the productivity and efficiency improvements offered by NZ pastoral and horticultural technologies.

NZ trade minister Tim Groser welcomed the Chinese delegation to Auckland with a review of the free trade agreement between the two countries, signed in 2008. New Zealand was the first developed country to do so

Groser said the increase in NZ exports to China in the 12 months to April 2010 was $860 million and that the effect was like adding another mid-level market to the export statistics in just one year.

Exports of dairy products are now worth $1 billion a year, as Chinese consumers seek safe dairy products following the deaths and illnesses of babies when domestic dairy companies added melamine to infant formulas.

Ironically, the giant NZ dairy co-operative Fonterra had to blow the whistle on its joint venture partner San Lu and then write off its $300 million investment, and has now benefitted by a dramatic surge in demand for NZ-made milk powder.

But exports across a wide range of products have also grown strongly – such as wood, wool, kiwifruit and wine. Forestry exports to China grew by 80% in 2009.

“China has played a major role in sheltering New Zealand from the full impact of a global recession,” said Groser.

“What's more, our largest trading partner, Australia, has also done as well as it has because of China and a strong and growing Australia, while posing challenges for NZ, is good for us.

“First, we benefit directly through our rapidly growing exports to China and second, because Australia is by far our largest export market, we benefit indirectly from Australia's similar success in participating in the Chinese growth story,” he said.

New Zealand's largest meat company, Silver Fern Farms, recently studied the Chinese market and came to a surprising conclusion.

Chief executive officer Keith Cooper said the opportunity for Silver Fern Farms lies in supplying higher value products into specialty niche segments, not the commodities it has been supplying until now. He put that comment in perspective by outlining what the “mass market” means in China.

By 2025 it will have 15 cities with populations of over 25 million, 22 cities with greater than 10 million people and 23 cities with more than five million people.

Mass migration from the countryside to the city is increasing the spending capability of consumers but also reducing the productive capacity, forcing China to look beyond its own borders for alternative sources of food supply.

“At a government level China is absolutely focused on the security of its food supply and food safety, and New Zealand is well positioned in this regard.”

The Chinese have some very traditional eating habits that are not generically aligned to NZ meat production, particularly when it comes to added-value products. Chinese people will eat almost anything – accordingly the protein content of a meal may be met by pork, fish, chicken, beef, lamb or any variety of offal or animal derivatives like turtle, frogs, chicken feet, or shellfish.

Enterprise Ireland, the Irish government agency responsible for the development and promotion of the indigenous business sector, is now a regular exhibitor at the NZ Fieldays, promoting the world class capability of Ireland's agribusiness sector.